Towards Pax Sinica?

Transcription

Towards Pax Sinica?

Towards Pax Sinica?
China’s Rise and Transformation:
Impacts and Implications
Editor
Emile Kok-Kheng Yeoh
Institute of China Studies
Pax Sinica CRC 05-11-09.indb 3
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Institute of China Studies
University of Malaya
50603 Kuala Lumpur
Malaysia
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http://ics.um.edu.my
© Institute of China Studies
First published in 2009
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Perpustakaan Negara Malaysia
Cataloguing-in-Publication Data
Towards pax sinica? : China rise and transformation : impacts and
implications / editor Emile Kok-Kheng Yeoh.
Bibliography: p. 304
ISBN 978-967-5148-50-7
1. China—Foreign relations. 2. China—Economic conditions. I. Yeoh,
Emile Kok-Kheng.
327.51
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China after Thirty Years of Reform and Open Policy ♦ 137
China’s Future:
International Milieu,
Ethnoterritoriality and Realpolitik
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138 ♦ Im-Soo Yoo
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Chapter 8
China after Thirty Years of
Reform and Open Policy: Quo Vadis?
Im-Soo Yoo*
Introduction
At the beginning of the nineteenth century the Western powerful nations
descended upon the Chinese mainland. China during that period was in
malaise. The once formidable empire of the mainland nation was close to
collapse. The West labeled China the Eastern Sick Tiger or Sleeping Tiger.
It was deemed a “Sick Man” on the Asian continent who was feeble and
debilitated. In the nineteenth century, there was rampant corruption, rampant
poverty and widespread disease. It was during this period of time that China
exposed its vulnerabilities to the Western conquerors. The Opium War (18391842)1 led to China’s surrendering of Hong Kong to Great Britain.
After World War II, Civil War tore China into two conflicting factions, the
Nationalists and the Communists. The Nationalists retreated from the mainland,
took refuge in Taiwan and became a country of its own until today. Meanwhile,
the Communist state was under the command of Mao Zedong. This year,
2009, marks the 60th year of Communist rule in China. Mao’s legacy of communist ideology was the foundation of China’s solid political and economic
developments today. This year is also the 30th anniversary of China’s “Reform
and Open” policy of Deng Xiaoping. Deng’s model of reform and open-up of
China was the second historical epoch of modern Chinese history.
Now his successors, state political leader Jiang Zemin and Hu Jintao have
developed tremendously the economy and diplomacy of China as well as the
military solidarity of China’s defense. With the solid historical setting and the
modern stewardship under current successors, China has gained tremendous
developments and has high vision that in the thirty years to come, China will
become a strong nation in industry, trade, finance and diplomacy in the world.
Before the rise of China, there was only the Pax Americana. Now, China will
bring the Pax Sinica to the world.
139
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140 ♦ Im-Soo Yoo
This chapter aims at reviewing China’s past sixty years of the socialist
model, its thirty years of “Reform and Open” policy and its continued rise
in another thirty years in future. In comparison with Russia, the former
USSR, the question of whether the Chinese socialist model could or could
not survive will be a debatable reality. But China has already insisted that its
socialist model will not be changed. It is very interesting to note in the world
history that never has there been a single country which could thrive on a
socialist model. Now, the question which has drawn considerable attention
is whether both the contradictory policies of the Chinese model of one-party
socialist central rule with its pragmatic open-market basis for an economy
could sustain in the years to come. It is well known that under the socialist
model, political decision is primary while economics is normally secondary.
Most of the time, political decision overrides economic advantage. Will this
model of China be sustainable and become the exemplary model for the rest
of the aspiring countries in the world? Or will there be fallout and if there is
this possibility, will China fall on its back and relapse to the olden days of
historical torpidity?
Six Decades after 1949
This year, China will celebrate the 60th anniversary of its founding of a
socialist nation since 1949 which marked the birth of the first major socialist
country in Asia after World War II. It has been six decades since the founding
father of Chinese socialism, Mao Zedong succeeded in unifying the whole
nation which contributed to today’s unity and nationhood in China.
The first and second generation of Chinese socialist leaders like Deng
Xiaoping adopted a pragmatic position by introducing more market-based
economic policies while at the same time retaining the one-party political
system. The Chinese experience from the “Reform and Open” policies
introduced in 1979 was quite different from that of the Soviet Union’s
Perestroika and Glasnost 2. Its more pragmatic and flexible approach
compared to the USSR’s in times of the Cold War had achieved remarkable
development, especially after the collapse of communism. In the same year,
China established diplomatic relations with US, breaking its old policy of
political and economic alignment with the Soviet bloc.
The third and the fourth generation of the Chinese socialist leaders led by
the head of the Communist Party, Jiang Zemin and Hu Jintao, have inherited
the country’s impressive records from their predecessors. This year, two
anniversaries, i.e. 60 years of socialism and 30 years of economic “Reform
and Open” policy mark an important event, which was reflected in China’s
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ambition to host the Olympic Games in 2008. The event can be regarded as
a sign of political harmonization to bridge cultural gaps that had formally
existed between East and West. On the other hand, China is striving to turn
into a world leader in science and technology, while carrying out its military
and space programmes based on high-tech industrialization. For China
to achieve these two ambitious goals, it is of importance for the nation to
develop a sense of its cultural identity and common values.
These goals will certainly not be achieved overnight. It will take a
tremendous effort for either this generation of Chinese leadership or the next
one to live up to this new Chinese vision of a global power. China’s position
in the international order is still considered to be inferior to the US due to
many factors. This allows China to upset its Western counterparts every once
in a while. But once China reaches a level of equal line of sight with the US or
even becomes superior in the long run, the country has to be prepared to face
challenges and attacks from other countries, be it in the economic or political
arena. The ability of China to achieve this stronger position will depend on the
Chinese people, both the political leadership as well as the population.
Critical Factors in China’s Sustainability
The following six arguments may serve as a summary of my personal views
on this issue, based on my experience and research that I have accumulated
and conducted in the era of the Cold War. During that era, I collected ideas
and came up with a set of analytical tools for examining the rise and collapse
of a global superpower.
1) Every country should adopt a long-term vision for the future. China is no
exception in that regard. It should prepare a national long-run strategy,
as the basis of a strong nation and as a powerful country in the next
thirty years. It should learn from history – how the Anglo-Saxons, the
European nations and Japan had managed to build up their regional as
well as global power capacities. These are the areas that China needs to
look at, comparing its own experience with those of other strong nations
which have managed to rule the world in the last century. China will be
a powerful country in the second half of the 21st century – an era of Pax
Sinica.
The current financial crisis that was triggered by the US mortgage
subprime bubble has produced worldwide economic turmoil and recession.
There is a lot of discussion regarding whether this will eventually lead to
a paradigm change, away from casino capitalism towards a more stable
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system. At this moment, in the socialist sphere, the Chinese way is the only
system that seems to bear justifiable results. Comparing the failure of the
USSR model with the Chinese system leads to the conclusion that the latter
system is unique. No one knows whether the system will continue to work
or not. It depends on the Chinese people to make it work. Otherwise, the
global capital market system is at stake. No one can say whether it is only
a single case of operational failure and whether the world economy will
recover after this slowdown according to the business cycle theory.
But it could also be a failure of the entire global economic system as
such. In that case another new paradigm should be adopted. However,
many people believe that the capitalist system can work as a whole and
therefore needs only minor adjustments. The comparative system analysis
states that in socialism, political decisions for the allocation of resources
take a prioritized stand over the principle of economic efficiency. In market
economies, however, the opposite is true. This means that market efficiency
is a primary goal, with the political decisions merely functioning as a tool
to achieve these objectives. The US and China represent this contrast in
theory and can be regarded as good examples to support that theory.
2) In the context of this current financial crisis, the concept of a new bipolar
order of the global system is enshrined by the idea of the G2 as well as
G20. These are in the forefront that will play increasing role in global
decision-making in the world economy. The G2 – consisting of China
and the US – has gained importance as a concept during the course of
this crisis. Both countries are no longer seen so much as antagonists,
but are in fact complementing each other. The interdependence between
China and the US is very strong in terms of trade flows and financial
entanglement as well as political cooperation in many regions of the world.
Despite pressured by the Congress for the US to condemn China on the
manipulation of the currency, President Barack Obama’s administration has
chosen not to do so. It is the same position as the one taken by the Bush
administration. The main reason behind this motive is that the US heavily
depends on China’s purchase of its treasury bonds. In many aspects, the
US needs China’s help to tackle the current and also the future economic
turmoil. Therefore, the timing is not really right for the US to provoke
China. In addition, US have also stated that China had already taken steps
to enhance its exchange rate flexibility and confirmed its commitment for
greater flexibility. As such, the decision by Obama’s administration for not
condemning China is predictable.
In year 2007/2008 when the US subprime mortgage crisis occurred, it
created another big shock in world economy after the Great Depression
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in 1929. Until now, there is no equitable solution on how to overcome the
problem. There are a lot of these questions in the US regarding what the
cause is and how they can find the solution.
In Wall Street, there is an interesting saying among the financial
analysts as well as the economists that the Chinese people are exporting
lead-coated toys which are dangerous and hazardous for the American
children, while the US financial managers are also exporting toxic
derivative financial products, e.g. bonds in the market. In this picture, we
do not know who the winner is. Maybe China makes use of this chance in
this circumstance to bring up its name in the international power games.
On the political side, US needs China’s cooperation on several issues
such as North Korea, Iran and Darfur conflicts. The US would also be
looking into other areas of cooperation which include global climate
change and clean energy resource.
North Korea’s recent statement to withdraw from the negotiation on
the denuclearization of the Korean Peninsula has highlighted stronger and
inevitable participation of China to essentially revive the six-party talks,
which also involves Japan, South Korea and Russia.
These two issues, i.e. the declination to label China as currency
manipulator and the need for China’s strong involvement in North Korea’s
denuclearization, do not indicate that there is a one-sided dependency. But
in fact both countries are strongly and increasingly inter-dependent on one
another. Nevertheless, it will not be an exclusive G2 or America-China
affair as it is essential to include a combination of other strong political
players, i.e. EU, Russia and Japan to solve the problems at hand.
The bipolar system being established will increasingly cover global
issues that cannot yet be anticipated to reach their fullest extent today. In
times of a fast changing globalized bipolar system, different coalitions
between these players may form, leaving behind the static status quo of
the Cold War times. This will lead to even greater interdependence that is
subjected to political as well as economic preferences and power relations
among the countries involved.
3) The human rights issue is a basic concept in any society that is based on
common values in all countries throughout the world.
From the Chinese perspective, US is a country which is largely based
on the concept of individualism. But China is striving for nationalism,
collectivism and individualism at the same time. A good example for that
contradiction is Jackie Chan’s quote: “I’m gradually beginning to feel that
we Chinese need to be controlled.”3 The Hong Kong movie star said that
in a press conference in Boao, China. He made the remark referring to the
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experience of Hong Kong and Taiwan whereby people, according to him,
enjoy greater freedom of speech and that from his point of view, chaos
is the principal result of this kind of development. At the conference, he
said that the society in Hong Kong and Taiwan might be “too free” in this
sense. This statement has brought about great controversy and argument
in China and especially in Taiwan and Hong Kong in which legislators
and lawmakers expressed their anger over his freedom remarks, saying
that he failed to understand the meaning of freedom and democracy
despite having enjoyed the freedom, democracy and economic gains of
capitalism4.
This remark can be regarded as a turning point for China, considering
that China may now be at a crossroad in terms of its social development.
While the economy is growing rapidly, there is a huge demand for greater
freedom of speech and expression. But for a huge country like China with
a population of 1.3 billion, too much freedom could pose a threat to the
established order of the one-party system and the communist nation.
Western countries have always stressed that China should improve
the state of its human rights within its territory, as well as outside China
proper, such as in Tibet. That is to say that China should give more
freedom of speech to the citizens. Human rights problem is a serious issue.
Chinese authorities have always been strict on the freedom of expression
and have never really given such freedom to the people. On top of that,
the recent statement made by Jackie Chan goes in line with what the
Chinese authorities have proclaimed. Only when China becomes a more
developed country in terms of its sustained economy, then more freedom
of expression could be granted to its citizens.
This year the People’s Republic of China celebrates the 60th anniversary of the establishment of the socialist country while Taiwan, the
Republic of China, has for as long separated itself from Mainland China
and until now there are persistent confrontation and disputes between
them. The Beijing government wants Mainland China to be integrated with
Taiwan so that China’s Chinese will eventually come to the stage of full
integration to form a great China.
Comparing the political integration on the matter is not easy. Both
China’s and Taiwan’s economic sectors are starting their integration in
terms of mergers and acquisitions (M&A). Their connected economy
started to gradually grow up. The Beijing government directs financial aid
to buy the Taiwanese companies especially those in electronics, IT and
mobile industries. This is because Taiwan has more managed skilled-labour
and technology for the world market. China wants to be competitive in the
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world market. In recent years, China has become more interested in mining
for steel and iron in which such industry is expanding.
There is more intensive work in this field such as ship-building for the
freight and passenger ships as well as for the aviation industry. This is one
of the reasons that China will sooner or later become a strong country in
the marine aspect.
4) Chinese economic development brings about an increased ambition to
become a stronger military and naval force. It is essential for China to
secure the seaway for exporting products and to guarantee the smooth
flow of imports of raw materials. In the conference at Boao, President Hu
Jintao expressed China’s ambition for a new trade area called CEAGPOL
– Central East Asia Growth Polygon, consisting of Philippines, Hong
Kong, Macau and the Chinese provinces. China had expressed its feeling
to be a strong player by controlling the sea transportation along the area,
and become a competitor to Japan’s initiative of economic zone in the East
Asia, i.e. the Economic Partnership Agreement (EPA).
This area is also very important to be China’s frontline and as a
gateway for China to enter East Asia via sea. Until now, Japan has been
the strong sea power in the region, and therefore China should now take
more initiative to build up its naval force as a stepping stone in the future
as a sea power. It can be seen that China is building up its naval force
to strengthen and develop its first regional power as it is more interested
in Southeast Asia and South China Sea. The recent demonstrations of
China’s naval forces in which the military vessels are equipped with
nuclear power have shown the world that China has hidden all this
while its naval strengths. This means that China will be competent at the
regional level as a strong force and will aspire to be a sea power in the
world in future.
This intention of China to build up its naval force is also because of
the conflicts of the Spratly Islands, Paracel Islands and Scarborough Reef.
These islands and reefs are situated in the South China Sea and are under
territorial dispute between China and neighbouring countries i.e. Malaysia,
Philippines, Brunei, Vietnam, Taiwan, etc. According to C.G. Monique,
these islands’ are probably the most sovereignty-disputed areas on the
planet for its oil resources, fisheries and strategic sea lane5. But China has a
strong position and has built its watching control facilities at Mischief Reef
to look at the disputed archipelagos in the 1990s. Neighbouring countries
fear of the dominance of China power in the areas, which contain a lot of
economic potentials, i.e. in fishing and oil and gas reserves. In addition, it
can also be a territorial or sea line for marine transportation. On the other
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hand, when China becomes a strong naval force, it will pose a challenge
to the US and Japan.
We understand that a strong nation such as the US has the capability
and potential to develop the space and astronomical programmes as well
as to compete in marine affairs. In this case, China sought to gain more
proportion in regional market power in the sea in order to acquire greater
sea-power. As such, they need to build up vessel capabilities including
nuclear submarines.
As early as in the 15th century in the Chinese marine history, there was
a mariner named Cheng Ho who expanded the mission of China’s naval
expedition and maritime might in the regional area. Hence, whether it is
possible or not for China at this point of time to regain the potential and
impress others of its sea-power would depend primarily on the Chinese
leadership.
Recently, a US observation ship passed by the area of South China Sea.
It clarified that it was just a normal surveillance conducted in international
seas. China said that US has intervened in its territory while the US
argued that it was a typical international observation at international seas.
However, there was no confrontation between the two powers in the sea.
This was one showcase of a small incident but we could anticipate that
there will be more similar incidents between China and the US in the area
as well as in other seas in the future. This serves as a lesson and signal for
the two countries in tolerating their future interests in that the best way is
through consultation and not direct confrontation.
5) China is striving to become a strong nation on a par with other superpowers, especially with the US, EU and Japan. Rapid and successful
economic development is not enough to qualify China as a developed
country. This country has a huge population with wide disparity between
rural and urban population in terms of income, education, technology,
facilities, economy, social welfare, etc. China should narrow the gap.
Perhaps this is the best way to develop its science and technology sector
by stressing more on equal distribution, while at the same time not to
compromise its long-established cultural identity.
Another area that China needs to focus on is its cultural heritage. China
has a very long history of traditional culture. The Chinese people are proud
of their civilization. In this sense, China should export its culture beyond
the Asian region to the global level for “China-ization” of the world. It is
time for the Chinese to spread and propagate their culture and language
globally. English is an international language and widely spoken all around
the world. From the last century until now, the developed nations e.g. the
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Anglo-Saxon and the French have managed to export their culture. History
shows us that the strong countries could not sustain for long time without
exporting their civilization. They need to create a cultural domination,
which can be regarded as a challenge faced by the new Chinese generation
of leadership.
China also needs to develop its human capital. Education, being part
of the social capital, should be even more emphasized in the national
development. In this regard, more resources and infrastructure need to be
directed and invested in this area, especially in technology and science.
China has developed basic and applied science for the national building
and defense system. China will have to invest in education by putting in
place the necessary facilities that will promote and enhance the knowledge
based industries i.e. in science, technology, etc.
The Beijing government has also identified its long-run strategy and
development of the nation, i.e. to be a dominant industrial country and
a strong trade nation. Also, China has a wish to be a financially strong
nation which could self support on its own development of the nation as
compared to the US and EU. China could reach this stage only with strong
background in domestic banking, capital market and foreign exchange.
This is not a simple task for China. Even though it had succeeded in the
real economy, the financial business is not easy due to its more traditional
background, skill, manpower and capital accumulation. The technical
knowhow is also necessary to be developed in order for China to become a
financial hub and the next step for China in the future would be to include
all other Chinese-based countries, including the Chinese financial hubs in
the ASEAN countries.
6) Even though China has made remarkable development, especially in the
economic sphere, its political system has not picked up this pace yet. It will
be very crucial regarding which path of development, either political or
economic, that the country will choose in the future. Even if the economic
development can be sustained, the question of distribution of wealth and
disparity of welfare will have to be addressed by the nation’s leadership.
In addition to that, human rights and democratic participation must be
granted to the Chinese people if the country wishes to achieve the level of
a “truly developed” country as we understand it today.
Certainly, the rise of China in recent years has triggered different
responses and opinions on whether it would really pose a great challenge
to the US as the existing global superpower in economics and science
and technology and become itself a global leader that overrides or stands
shoulder to shoulder with the US in the future. It is bona fide to say that
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China does have the potential to develop to be a global superpower due to
its strengths in low cost of production, abundant labour force, huge market
and competitive exchange rate. However, much effort is required to bring
China to a greater height as it loses its first-mover advantage compared to
the world’s giant nations.
The Way Forward
After discussing the many factors and aspects that may cause China to rise
or stumble and fall, to further the discussion, I would also like to cite a few
projections and anticipations on the economic, political, social and cultural
arenas of China in the eyes of the world in the next 30 years to come amidst
the pre-emptive measures taken by China.
1) China had in the last decade achieved more than 10 per cent economic
growth until last year6. This means that China’s reform and open policy
was effective and extensive economic growth policy is possible. To be
a developed nation, it is a necessary strategy for China in the future to
improve its productivity and its industry structure together with human
capital via innovation and education.
First, industry structure should be changed from labour-intensive to
technology-based or capital-oriented. In the beginning of industrialization,
China was quite successful by remaining a low-wage, low-skill and labourintensive economy. Retaining this mindset without transforming into a
high-value economy will only produce low growth in the country. As such,
there is an urgent need to address critical economic issues, particularly
those related to human capital, technology and innovation as well as the
pricing system.
Enhancing human capital is a strategic move but it must also look
beyond education and into the labour market policies. If the supply
of human capital is mismatched with industrial need, there will be
unemployment and underemployment.
Technology and innovation are essential for an economy to move up the
value chain. Hence a culture of innovation is essential if competitiveness
is to be improved. Many measures to develop technological capacity have
been introduced with only modest success. China needs to also combine
technology and market-driven innovation approaches to be ahead of the
other countries, lead in strategic technologies and capture market shares
in products and services growth. This economic achievement is based on
intensive productivity strategy.
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Apart from that, domestic consumption and demand must also be
boosted in order for China to be a strong nation. According to the Chinese
media, the national commission for reform and development is cutting
income taxes and will introduce a new stimulus package of over 4 trillion
yuan to be spread over two years (2009-2010). A stock market injection of
at least 400 billion yuan has also been allocated in its measure to increase
investors’ confidence7. Since mid-September 2008, the Central Bank
of China has cut interest rates for three times. Besides, anticorruption
measures have been announced, to prevent the extra funds from enriching
local officials.
Premier Wen Jiabao pledged to stimulate domestic consumption
by improving the rural circulation network, increase the availability of
various commodities in rural markets, improve urban community service
facilities, promote the upgrading of durable goods, support development of
circulation companies, stimulate holiday consumption through exhibitions,
and to step up supervision over product quality and safety (after the crises
of tainted milk and hazardous colourants in toy products).
In addition, to facilitate external trade, China plans to improve current
financing services for importers and exporters by urging the banks to
provide more export credits. Trade between Guangdong, the Yangtze River
Delta and Hong Kong and Macao, and that between Guangxi, Yunnan and
members of the Association of Southeast Asian Nations (ASEAN) will be
settled in renminbi on a trial basis.
Furthermore, China will increase the imports of products that are
needed in its market, particularly hi-tech products, critical equipment and
elements, energy products and raw materials.
Besides, China and Japan are regional big power in terms of politics
and economics powerhouse, but in 1972, China also established diplomatic
relationship with the US. China’s economic development was aided by the
Japanese, as Japan used to have economic cooperation with China and now
the interdependence is to become stronger, following the relationship that
both countries developed from the past.
Also, since 1992, China has also established diplomatic relationship
with South Korea. China becomes one of the largest trade partners of South
Korea, with investment and capital flow since the last decade. Two-way
trade with China hit a high record of more than US$200 billion last year
despite the global economic crisis. Both sides will strive to raise that figure
to US$250 billion by 2010 while gradually balancing two-way trade.
We can see that things have changed over years. The US was used
to be the most important partner of Japan and South Korea in terms of
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economy, trade and military alliance. Today, it is pretty much different.
The rise of China has surpassed the importance of the US to become the
most influential trade partner of Japan, South Korea as well as the Asian
region8.
Other than that, China also formed economic cooperation with the
ASEAN countries for economic priority in the form of trade, investment
and capital flow. The more China has economic relations with ASEAN,
the better it is for implementing security policy and influences.
China has a number of companies in private sector and joint venture
production. These are joint ventures with Chinese diasporic people in
the region. One of the main tasks is to help them to look for business
opportunities in ASEAN. Most Chinese companies have businesses in
ASEAN and some of them are doing very well.
China has an aggressive influence towards ASEAN. In the past, Asia
was worried about its tributary system in the time of the Dynasties, which
gave China strong influence towards Asia. China has signed treaty of
amity and cooperation with ASEAN. China used more soft power with
ASEAN nations. In this case, China gains the regional advantage of
market penetration and economic cooperation with most of the countries
in the Asian region as compared to the US government, which has also
considered the treaty of amity and cooperation with ASEAN countries.
Take Malaysia-China diplomatic relationship which was longestablished back in 1970s for an example. These two nations will further
strengthen their bilateral relationship in order to foster future development
of the two countries in trade, economy and regional peace. It can be seen
from the visit of Malaysia’s premier Datuk Seri Najib Tun Razak to China
in June 2009 when he pledged to negotiate the territorial disputes so that
they would not hamper the cordial Sino-Malaysian ties9.
However, 30 years down the road, China is anticipated to still lose
to the US in terms of technology development. It is intensively exportoriented and FDI would still be the major capital and financial support to
develop local industry and financial market.
At the moment, China has underdeveloped domestic banking, financial
and capital market system. It should be more developed and expanded
towards neighbouring countries, i.e. ASEAN and Shanghai Cooperation
countries, at the regional and global levels, including the US and Europe.
China should develop their infrastructure and market access as well as
efficient networking of city and airport, and reliable public transportation,
electric supply, telecommunication access, frequent flights to other financial centres and major cities should be more convenient, more connected
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with other countries. China has a development plan in Southern area, for
example, the industrial and financially connected triangle linking Hong
Kong-Macau-Guangzhou. It is a platform for China to build a better
connection with Beijing in order to become a strong financial nation.
There are many obstacles to overcome in its way to become a strong
financial nation. In terms of finance and capital aspects, the modern history
of its banking and finance is not long but it has always been using its own
system during the socialist times. Under the socialist system, it does not
work the Western style but the Chinese way. Now with the open policy,
for China to become a strong financial system, there should be more
systematic and competitive system acceptable by the Western standard.
Also, China’s financial institutions, both in structural and operational
terms, are not very well developed in comparison with the Western
institutions. China should develop its capital and money institutions. It
needs to develop its capital institutions in order to be competitive. The
status of China’s financial market depends firstly on the strength of the
Chinese economy. Financial institution depends on two dimensions. One,
it should be profitable and with assumed risks, and at the same time since
it is a public affair, it needs to be transparent and devoid of moral hazards.
Chinese financial authority focused on the development of financial market
and strengthening financial supervision, consistent with Chinese ambition
to become a strong financial nation. In the global world, M&A (Merger
and Acquisition exercise) is frequent in industry, banking and financial
institutions. China is not very experienced in M&A and there is an urgent
need to develop that.
2) After the G20 conference in 2009, China is now a major partner in an
international effort in combating crisis by contributing an unofficial amount
of US$40 billion into the US$1.1 trillion package of measures agreed in
the summit to boost the current sluggish world economy10. Since 2003, US
and China have met and consulted each other on the economic level and
currency issues, but they have lots more expectations beyond economic
issues. The two countries have decided to expand and to enlarge many
fields beyond economic issues such as diplomatic issues, climate change
and terrorism. This also means that the US cannot readily accept China as
a shoulder-to-shoulder partner on all major issues.
The Chinese government believed that the instability of the US dollar
is one concern for Chinese dollar reserves in US financial market. If China
pulls out all its money reserves from the US financial market, then the
dollar will plunge and will set off jitters in the world currency exchange.
Chinese government believes that the US is one big country and could
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152 ♦ Im-Soo Yoo
also prove useful for China’s advantage in the future. However, according
to R.N. Cooper, the dollar is likely to remain the dominant international
currency for many years due to its widespread and convenient use in
foreign exchange transaction, having relatively low risk and highly liquid
securities11.
Furthermore, US demands China to develop its domestic market for
import and China should improve its quality of life in that social safety
net should be guaranteed, besides creating more employment for all
people. In this way, US could have more options in China’s economy. US
believes that China has a great potential for their economic penetration
and expansion in the Asia-Pacific region and would expect China to join
in rank in major trade blocks with US as a member.
On top of that, China has dominant sea power in the South China Sea.
This is the seaway to ASEAN in terms of trade, security and cooperation.
US is interested and perceived this seaway as important to US as the Indian
Ocean and the Pacific Ocean. In recent years, US marine had harboured for
observatory in these areas and Chinese marine had in direct confrontation
with the American Marine. This could be one main reason for ongoing
political conflict in the future.
From the political perspective, China could not remain as a socialist
political party-ruled country. Also, China should not terminate the
relationship with Russia and the latter’s former satellite countries that are
now independent from Russia and located in the neighbourhood of China.
In fact, China has also cooperated with Russia against US. China founded
Shanghai Cooperation Organization in Beijing in 2001 consisting of 6
members12. It is aimed at cooperation at the international level in mutual
economic interest and combating terrorism and drug trafficking. But all in
all, the main common interest is the guarantee of energy supply. This will
form one strong group against NATO by establishing cooperation, first, in
economy, and later, in defense system in the region. In the future, this will
stimulate a convergence of major unipolar power which is now enjoyed by
US alone. China and Russia will cooperate to counter US prevalence and
hegemony.
Another political tension faced by China would be the dispute against
legal ownership of the Spratly islands, Paracel islands and Scarborough
Reef among the surrounding neighbour countries in the Asian region.
China would consistently be strangled unless the issue is resolved for the
good sake of all the nations involved.
China being a huge country with a large diversified population will
definitely have its own political issues. But until now, China is still ruled
11/5/2009 7:01:16 PM
by the socialist Communist Party of China in a one-party system. This
is a supreme organization, which decides on everything, compared with
Western democracy represented by every state of citizens. China also has
many surrounding autonomous entities, who are continuously claiming
independence, such as Tibet and Taiwan. These issues are unresolved and
therefore such political instability and non-consolidation of democracy will
be an obstacle to lure Western investors into the country.
As an extension to that, China has also often been stroked by challenges
related to the international relations issue. Tibet was invaded by the
Chinese government fifty years ago and the Tibetan leaders left for India
into seclusion there. Dalai Lama and his followers have staged protests
and operated from there. But China has had its control over the Tibetan
government. This is an ongoing conflict between Tibet and China and will
take some time to resolve. US has been keen on showing strong support
for the Tibetan government-in-exile.
Also, the July 5 protest in Urumqi, the Xinjiang regional capital, which
involved ethnic riots between the Han, China’s largest ethnic group, with
the Uighurs, the minority ethnic group, also poses a challenge to China’s
government in looking for the best solution to resolve the issue without
creating much dispute in the country amidst the judgment of the nations
worldwide. Certainly, China’s approaches in dealing with the riots have
met much condemnation and dissatisfaction. One of it is the death toll of
Uighurs revealed by the government. It was deemed to be suppressed while
Uighurs expressed their disbelief claiming that many Uighurs had died in
the riots.
It further relates to the issues of human rights and freedom of
expression which were always sensitive and controversial in China. Recent
action of the Chinese authorities to shut down blogs, internet forums and
social media sites such as Twitter13 had faced much criticism claiming
that the action was inconsistent with the right to freedom of speech and
expression. It might be out of a concern to prevent further inflammation
of the situation, but the intention of the government to suppress political
and public discussion of the 20th anniversary of the Tiananmen Square
pro-democracy protest was clear and vivid.
Perhaps adopting more capitalist ideology, and attention on granting
more human rights and freedom of expression to create a more democratic
China would be a difficult task to be accomplished in a short period of
time. But with sheer will and determination, and in order for China to gain
more respect from global nations, such move is inevitable. History shows
no nations could become a global superpower by oppressing basic human
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154 ♦ Im-Soo Yoo
rights and freedom of speech and expression. Certainly, China would not
be an exception.
3) China is ever ready to extend and direct its foreign aid from the Asian
region to Africa and South America. China has also vowed ambitiously to
the rescue of the Third World nations. China is boosting aid and assistance
to the Third World in a bid to regain its diplomatic clout as a major donor.
China’s initiative comes at a time when the Third World nations have
just started to see strong economic growth in their countries, nevertheless
unfortunately marred by recent price hikes for the continent’s rich natural
resource, i.e. oil.
As a way to expand the Chinese cultural heritage to the world, China
should have invested more by providing training for the Third World’s
population to propagate and inculcate the learning of the Chinese language
and also more comprehensive Chinese cultural heritage. This is the best
way to globalize the cultural components of China.
With over 1.3 billion Chinese population in China and more residing
overseas, there stands a bright opportunity for China to spread its culturefull heritage and history to the world to create and form an “Oriental”
value with the well-known serenity, tranquility and decency. In fact,
the widespread use of Chinese language and cultivation of Chinese
traditional values worldwide would ensure the greater forge of China in
the international platform and more entrenched it would become.
From the social aspect, infrastructures such as the transportation,
electric and communication structures are not well developed. Also, a big
portion of its population is not well educated. The high illiteracy rate is a
big obstacle for China, in its attempt at industrialization. Also, there are
many who receive low income and many who live in hardcore poverty. In
comparison to the Western countries, Chinese population is also not well
exposed to the banking system and this could cripple the development of
the financial market.
As such, China needs to develop the human and social network. The
government should cultivate more qualified personnel who are equivalent
to international standards with good command of the English language
as well as highly motivated. China should also develop its infrastructures
adhering to the international standard.
In short, even though China has seen pleasant outcome from its
transformation from socialism to more capitalism, it is still on the way,
and the transformation is not full and complete yet. China needs more
time and effort to complete this transition as it needs also to develop its
industry and trade market which serve as a strong foundation and essential
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basis for China in order to become a financial hub not only in the region,
but also globally.
However, the progress of development could be marred by several
issues that if not given appropriate concern, could cause further malaise
for China in the next 30 years. First is the integration of all regions
and provinces in China especially of those autonomous regions such as
Tibet in terms of culture, economy, politics, ethnicity and religion. It is
crucial that China needs to be united internally and domestically before
proceeding to the international arena to be a superpower or it is susceptible
to great criticism which jeopardizes the image as a great leading country.
Often, China has been reported to suppressed human rights and freedom
of expression via propaganda and media blockage. Unless China could
tolerate such liberalization, it will not gain respect from the free developed
countries of the world.14
This in fact was ironical if compared to America. Way back in 1835, a
French political thinker and historian, Alexis de Tocqueville, in his famous
book Democracy in America had written about the success of democratic
practice in America compared to other countries while China at this
moment is still under great condemnation of its one-party political system
and its suppression of human rights and freedom. At times, China shows
no appetite in urging for political liberalization. A solid example would be
the permanent scar of China marked by the crackdown on pro-democracy
protestors around Tiananmen Square 20 years ago.
Apart from responding aggressively to the possible threats and resolve
them in a proper manner, China should grab the opportunities and the
privileges it has to expand the country in the international arena. China
has huge markets luring investments from developed countries while
at the same time, invested in other countries in the region. In this case,
China could be a stakeholder as one of the world leaders with extended
relationship with countries in the region. China’s firm and well-established
cooperation with Asian countries in terms of trade, economics and
politics as well as diplomacy together with strengthening military forces
patrolling and playing more vital role in the East and South China Sea
would definitely stand to be an advantage to outrage US’s hegemony in
the region. To achieve this, continuous close rapport among all countries
in the region with China must be maintained and China should also focus
more on R&D in technology to further empower its military forces.
On top of that, together China and America could form a “Chimerica”
alliance that would emerge to be a great power economically. Only then,
the real Pax Sinica could be achieved by China.15
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156 ♦ Im-Soo Yoo
However, with great power come great responsibilities. Once established as a global leader, China must be prepared to support and provide
aid and help to its less developed counterpart countries. Furthermore, once
it becomes a great power, China must also be ready to react to any criticism raised by other countries, just like the US, EU and other international
organizations always being blamed and criticized by the developing nations
now. It must also play a vital role in global issues such as climate change,
world politics, human rights, food and clean water supply and national
conflicts, etc. in order to maintain its status as a strong nation.
This year marks the 30th anniversary of China’s economic reform
and open-door policy. China has already achieved noticeable success in
becoming a strong nation of trade and industry. The next step is for China
to become a strong financial nation in the next thirty years. This will be
China’s second achievement in the reform of its open policy.16
We have discussed China’s model of economic development and
political orientation, but discussion on the future direction and austerity
of China is certainly difficult. While there is a lesson from the failure
of USSR model and the new Russia, we have limited understanding
on China’s sustainability. The above discussion represents my personal
opinions.
Conclusion
China is a unique case worthy of investigatory research. At most times,
it seems that China is capable to resolve its own obstacles and prove
its resilience. China hardly falls from external shock and pressure from
international watchdogs. In the Cold War time, there were no complicated
external shocks yet from the multilateral angle, unlike today’s China which
faces more obstacles than ever. If in the old days China was safe under the
protection of the socialist bloc like USSR, now in this globalization period,
this kind of protection no longer exists and it is left in direct confrontation
with US power.
China is now in many fields running parallel with US. It is now underway
catching up with US pace of advancement in technology, capital and human
resource and military defense. China should be ready to handle the pressure
of criticism on its aggressiveness and assertiveness in world agenda when
its impact of advancement is observable and felt by the competing nations
around the world.
To conclude this discussion, I think that there is no ideal model for ruling
the people and the question remains that which system is better. It depends on
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the people and the nation as such. In the past, the world was not as integrated
as today. In today’s world, however, globalization has resulted in a closer
relation among nations with increased interdependencies. Anyhow, it is hard
to predict what role will today’s world superpowers play in the future.
The progress of China would certainly be dragged by its Communist
Party ruling system and practice, and unless more liberalization is granted,
China will not be able to achieve the same level as in Western countries in
all aspects. If it would be impossible for China to relax its political ideology
of Communist one-party rule, a certain level of political as well as social
freedom must be provided, regardless of the political system.
I believe that 30 years is a long way down the road, and China certainly
has enough time to develop its economic, political, social, cultural and
financial sectors while at the same time resolve the existing and emerging
domestic woes to stand proudly as a global leading country.
Notes
* Dr Im-Soo Yoo 유임수 / 劉壬洙 is Professor Emeritus at the Department of
Economics, Ewha Womans University, Seoul, Republic of Korea. He obtained his
Bachelor of Arts and Master in Business Administration from Yonsei University,
Korea, and holds a PhD in Economics from University of Cologne, Germany. Dr
Yoo has been teaching for the past 30 years. He has been Visiting Professor at
various universities throughout Europe and Asia including University of Munich,
University of Potsdam and University of Paris III. Dr Yoo served as Visiting
Professor at the Faculty of Economics and Administration, University of Malaya,
Kuala Lumpur, Malaysia, and currently he is a Senior Research Fellow at the
Institute of China Studies, University of Malaya. Dr Yoo was advisor to the Board
of Audit and Inspection of Korea and also several other government and corporate
organizations. He was President of Korean Association for Contemporary
European Studies and currently President of Asia-Europe Perspective Forum.
His current research interests include international economics, trade, economic
development and global finance especially for economic integration between
European Union and East Asian community.
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chan>.
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167407.html>.
11/5/2009 7:01:17 PM
158 ♦ Im-Soo Yoo
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the World Order”, New Straits Times, 5th April 2009, p. 20.
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Power Fuels Clinton Trip to Asia”, New Straits Times, 24th February 2009, p. 16.
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11/5/2009 7:01:17 PM

Towards Pax Sinica?

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